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The IMF's Unmet Challenges

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  • Barry Eichengreen
  • Ngaire Woods

Abstract

The International Monetary Fund is a controversial institution whose interventions regularly provoke passionate reactions. We will argue that there is an important role for the IMF in helping to solve information, commitment, and coordination problems with significant implications for the stability of national economies and the international monetary and financial system. In executing these functions, the effectiveness of the IMF, like that of a football referee, depends on whether the players see it as competent and impartial. We will argue that the Fund's perceived competence and impartiality, and hence its effectiveness, are limited by its failure to meet four challenges—concerning the quality of its surveillance (of individual countries, groups of countries, and the global system); the relevance of conditionality in loan contracts; the utility of the Fund's approach to debt problems; and the Fund's failure to adopt a system of governance that gives appropriate voice to different stakeholders. These problems of legitimacy will have to be addressed in order for the IMF to play a more effective role in the 21st century.

Suggested Citation

  • Barry Eichengreen & Ngaire Woods, 2016. "The IMF's Unmet Challenges," Journal of Economic Perspectives, American Economic Association, vol. 30(1), pages 29-52, Winter.
  • Handle: RePEc:aea:jecper:v:30:y:2016:i:1:p:29-52 Note: DOI: 10.1257/jep.30.1.29
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    References listed on IDEAS

    as
    1. Allan Drazen, 2002. "Conditionality and Ownership in IMF Lending: A Political Economy Approach," IMF Staff Papers, Palgrave Macmillan, vol. 49(Special i), pages 36-67.
    2. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, pages 3-24.
    3. Barry Eichengreen, 2003. "Restructuring Sovereign Debt," Journal of Economic Perspectives, American Economic Association, pages 75-98.
    4. Dewatripont, M & Roland, G, 1992. "The Virtues of Gradualism and Legitimacy in the Transition to a Market Economy," Economic Journal, Royal Economic Society, vol. 102(411), pages 291-300, March.
    5. Hurd, Ian, 1999. "Legitimacy and Authority in International Politics," International Organization, Cambridge University Press, vol. 53(02), pages 379-408, March.
    6. International Monetary Fund, 2006. "Ireland; Financial System Stability Assessment Update," IMF Staff Country Reports 06/292, International Monetary Fund.
    7. Drazen, Allan, 2002. "Conditionality and Ownership in IMF Lending: A Political Economy Approach," CEPR Discussion Papers 3562, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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